The threat to the Burgeoning Bourgeoisie

In the last edition of the economist there was an article, the ‘burgeoning bourgeoisie’ that said ‘for the first time in history more than half the world is middle class’. It also highlighted that while the increase India and China has been, as expected; massive the middle class has increased dramatically across all emerging markets. There are for example 80 million more middle class Sub Saharan Africans today than in 1990.

This growth in prosperity is something I have been working for throughout my career, but it is fragile and millions of lives now rest on the decisions that will be taken in the developed world over the coming months. The banking crisis has left millions of the world’s population in real peril and the longer the crisis continues the more of this new middle class will slip back into poverty.

From G7 to G20 - The Financial Crisis

The G7 finance ministers meeting on the 13th passed almost un-noticed there were the requisite statements on coordinating the response to the financial crisis, resisting the pull of protectionism, and the importance of free trade, but no progress on an international trade deal, or a global response to the crisis.

The real priority is to shore up the banking system. Governments should take action together to remove toxic assets from banks’ balance sheets through insurance schemes, and reopen the flow of credit. Im surprised that Governments are mainly taking advice from bankers in this restructuring, when input should come from as wide as possible, including other sectors of the economy.

Attention is now focused on the G20 meeting in London in April, with many hoping that it will become the starting point for recovery, for a new global financial and governance structure.

Trade Talks and the Financial Crisis

The current state of the world economy and the financial crisis makes the successful conclusion of the Doha Round of trade talks all the more unlikely.

The Heads of the G8 Countries are making all the right noises about resisting the draw of protectionism in a retracting market situation and with increasing unemployment at home, but for all this, the result is the same; the Round is not likely to be completed in the present climate and almost certainly not within the year.

While I congratulate Pascal Lamy for his continuous and seemingly untiring efforts to keep moving forward with the Round, I do not believe that either the upcoming G8 or G20 meetings will hasten the conclusion of the Doha talks.

Slumdog Millionaires….

While in Bombay last Month my wife and I along with some colleagues from the UK and Canada, saw Slumdog Millionaire, I thought it was an exceptional film, Danny Boyle should be extremely proud, particularly of the way he captured the image of India. I know the author personally, we met while he worked at the Indian High Commission in the UK, I had the pleasure of reading an early version of the book, it’s a great and inspirational story.

I was however disturbed to read, the allegations lodged against the films makers that the children who starred in the film were paid almost nothing and are still living in the same conditions as when they were discovered by the casting scouts.

I hope these allegations are not true, and that some of the films profits will reach the people who live in the slums, particularly the kids who starred in the film, as Danny Boyle has since said. There is a potential millionaire, born every day in all the Slums of India.

Scandals and Corporate Governance

During my recent trip to India, the papers were full of stories about corporate governance triggered by the recent Satyam Scandal. Satyam was one of India’s top 4 IT Companies and the 2008 winner of the coveted Golden Peacock Award for Corporate Governance under Risk Management and Compliance Issues, of which it has since been stripped.

The arrest of Satyam’s senior leaders including, Vadlamani Srinivas, Ramalinga Raju, and his brother Rama Raju on charges of false accounting and fraud in what has been described as India’s ‘Enron’, coupled with the Madoff scandal in the US, the largest investor fraud ever committed by a single person, clearly demonstrates the need for system of corporate governance based on values and transparency.

These 2 scandals highlight the danger of putting too much faith in a single person rather than an Organisations as a whole, the leading figures in both scandals took advantage of their positions and reputations to defraud large numbers of people who trusted and entrusted them with their money. While the majority of business leaders are upstanding and trustworthy, there should be no circumstances when a leader should be above their organisation.

India and the emerging markets the solution to the Credit Crunch?

In the context of the recession and ‘credit crunch’ I think people would have been amazed had they been in Gujarat yesterday and the day before, nearly 20 000 people attended the opening of the Vibrant Gujarat Global Investor’s summit 2009. India’s captains of industry and its top business leaders were present for the summit as well as representatives from governments around the world.

In the session I chaired, ‘Infrastructure with a focus on Special Investment Regions’ there was a stampede to sign MOU’s, it was an amazing site, to see so much confidence in India’s particularly Gujarat’s growth. Companies from all round the world were falling on each other to sign, Japan, Germany, the US, the UK, China, Korea and South Africa among many others.

The PM of Kenya and the Vice President of Uganda along with the numerous ministers from many African and Asian countries who were present for the summit seemed almost dazed at first by the response from business were desperate to learn from the experience.

The summit is the perfect antidote to all the news floating around about investors to nervous to invest. It was a hugely encouraging experience, India; especially Gujarat is the place to be. I have no doubt the solution to the credit crunch lies in emerging markets like India where there is still growth and the opportunities for business, as demonstrated over the last couple of days, is huge.

Dubai, Singapore and Malaysia optimistic about global financial crisis

Before the Christmas break I had the pleasure of taking a whistle stop tour of Dubai, Singapore and Malaysia. It gave me the opportunity to see firsthand just how ‘global’ the current financial crisis is, reaching out from the west, and affecting the rest of the world.

In Dubai the construction industry, long a pillar of the countries growth, has ground to a virtual halt and the price of Real Estate has dropped dramatically, but there is none of the panic or pessimism that’s visible in the west.

Following meetings with several of the financial groups in Dubai the impression I received was one of optimism in the long term. There was the belief that this current crisis was inevitable, that the last few years growth had been unrealistic and un-sustainable, and that the current recession is a correction.

There is even less pessimism in Kuala Lumpur and Singapore, the belief that the storm can be weathered is strongly rooted and that after a period of stock taking growth will resume, albeit with more realistic returns. This feeling of optimism is something that I and the CBC will tap into as we actively participate in both Dubai and Malaysia later in the coming year.